Would leaving the EU cost the NHS?

Published: 15th Jun 2016

In brief

Claim

Leaving the EU would cause billions of pounds worth of damage to the NHS budget each year.

Conclusion

Most economists predict that leaving the EU would harm economic growth and be an overall cost to the government’s budget. Whether this affects spending on the NHS would be depend on future political decisions.

“Based on IFS analysis, if we leave the EU, the public purse is likely to lose enough money each year to fund the whole of NHS England for 3 months.

Of course not all the public spending cuts would fall on the NHS. But it could still be as much as £10 billion a year by the end of the decade.”

Frances O’Grady, TUC General Secretary, 14 June 2016

 

In a speech delivered yesterday, Frances O’Grady of the TUC claimed that the yearly cost to the government of leaving the EU would be equivalent to about 25% of the total budget of NHS England—so enough to fund it for three months.

 

Most economists agree that the government's budget would suffer, if the UK left the EU.

The claim has been properly qualified and the figures add up. The TUC’s analysis takes average cost to the government budget predicted by the Institute for Fiscal Studies (IFS), an independent think-tank, and compares them to the projected annual budget for NHS England in 2019-20.

The IFS builds on the view of most economists, that the economy would suffer if we left the EU, to show how this would affect government finances.

It’s worth noting quickly that economic models are never perfect.

 

That doesn't necessarily mean that less money would be spent on the NHS.

Ms O'Grady suggests that this might mean a loss of £10 billion each year to the NHS budget. This is a claim about what future political decisions on public sector spending might look like if there were less money to go around.

It’s difficult to say whether or how many cuts would fall on the NHS, as Ms O’Grady says. The Coalition government committed to increase spending on the NHS in the aftermath of the 2008/09 recession. It’s possible that future governments would choose to protect NHS spending too.

The analysis also assumes that the UK government would maintain its commitment to a £10.4 billion budget surplus by 2019/20.

 

The 'Brexit Budget' is also a hypothetical look at possible political decisions.

Writing in today’s Times, current Chancellor George Osborne and his predecessor Alistair Darling also draw on the IFS calculations in framing their own hypothetical Brexit budget.

The pair say that a post-Brexit government would have to plug a “£30 billion a year black hole” in the public finances. This is the middle of a range suggested by the IFS for the possible cost of leaving the EU to the government’s budget, from £20bn to £40bn by 2019/20.

Mr Osborne and Mr Darling suggest that if half of the £30 billion were covered through extra taxes and the other half through extra cuts, the NHS could be asked to take a £2.5 billion hit (about 2% of its budget).

Again, it’s important to distinguish between two steps in the analysis.

The first suggestion is that leaving the EU would cost the government overall, a view shared by most economists.

The second is a set of judgements about what impact these additional costs might have on future political choices about public sector taxation, borrowing and spending. Any cost to the NHS budget would be the result of political decisions about public sector spending, not a direct economic consequence of leaving the EU.


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